Texas Instruments builds a large plant to produce a great quantity of products, hoping that as prices decline, sales volume increases and thus costs decline. This market-penetration pricing is dependent upon three conditions existing in the marketplace. Which one of the following is NOT one of these conditions?
a. Low price discourages competition from entering the market.
b. Production and distribution costs actually fall with increases in production.
c. Low prices does not increase consumer demand but increases retailer competition.
d. The market is stimulated by lower prices.e. The market is highly price sensitive.

Penetration pricing is a marketing strategy employed for a new product. The price of the new product is initially set relatively low in order to attract customers to the new product.

The goal of penetration pricing is to attract customers through the low prices. If penetration fails to achieve this goal, the firm would most likely incur losses.

Also, if a price war erupts among retailers, it would lead to losses and the goal of penetration pricing would not be achieved.

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Parrain Parrain · Answer 2 · 2021-12-02T14:10:20+01:00

For the strategy that Texas Instruments wants to embark on to work, it is not ideal that c. Low prices does not increase consumer demand but increases retailer competition.

For the strategy to work:

More people have to buy the product when the price drops
Less competitors should come into the market because they would be worried about low profits
Costs reduce with higher production

If a situation arises where people don't buy regardless of the small prices and more competitors enter thereby reducing market share, Texas Instruments will make a loss.

In conclusion, it is best that there is little competition and increased demand for this strategy to work.

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